The Family and Medical Leave Credit . . .

And what you should do before the end of this month. 

eagle reflectionThanks to the Tax Cuts and Jobs Act, a qualified employer who pays at least 50% of the salary of a qualified employee while he/she is out on family or medical leave can claim up to a 25% credit on those qualifying wages.

Qualified Employer

To be considered a qualified employer, you need to have a written policy in place by December 31, 2018 to pay at least 50% of normal straight time while an employee is on family or medical leave. The policy must provide at least two weeks of paid leave to all qualifying full-time employees.

The two-week minimum requirement should be prorated for part-time employees — defined as those working less than 30 hours per week.

Family and Medical Leave

For purposes of the credit, eligible leaves include:

  • The birth and care of a newborn child of the employee; or
  • The placement of a child with the employee for adoption or foster care; or
  • The employee’s inability to perform the functions of his or her position due to a serious health condition; or
  • To care for a spouse, child, or parent who has a serious health condition; or
  • A qualifying situation arising from the employee’s spouse, child, or parent serving in the military.
The Credit

To compute the credit for eligible wages, the applicable percentage is 12.5% increased by 0.25 percentage points for wages paid for family and medical leave that exceed 50% of the employees’ normal wages.

If an employee pays 100% of the employee’s normal wages, the credit percentage is equal to 25% (12.5% + 50% x 0.25%) of the wages paid not exceeding 12 weeks of leave.

Highly compensated employees — earning $72,000 or more — are not eligible to be included in the computation of the credit.

What You Need to Do  

If your organization doesn’t already have a written FMLA policy but would like to take advantage of the credit, your policy must be in place by December 31, 2018. To satisfy the requirements of the credit, all eligible leave payments called for in the policy must be made by December 31, 2018.

 

Author: hunterbrowncpa

Business Coach, Entrepreneur and CPA

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